Thankfully, I avoided getting caught up in the fast-food labor protests last Thursday since the folks who come and unchain me from my desk each day were stuck in a drive-through lane somewhere. Watching the news, it looks like last Thursday would have been a bad day to run out over lunch for a Frosty or Big Mac. The fast-food restaurant-targeted labor protests occurred in over 60 cities across the nation. (Read More)
The primary pain causing folks to go to the street with placards in place is wages. According to the article referenced above, the median pay for a fast food worker is $9.00 an hour. They point out that would equal around $18,500 / year, well short of the federal poverty level. Of course, minimum wage for non-tipped employees currently sits at $7.25. Some labor groups are asking for $15 an hour and even President Obama has suggested raising the minimum wage up to $9.
I’m sure each of you has a strong and well-thought out opinion on this labor unrest. Some of you want to see change. Others see dangers in wage manipulation away from market forces. No matter what side of the political spectrum you may fall on, we – as HR professionals – have a responsibility to make sure our business leaders have the facts and analysis they need to address this situation.
If I’m a leader in the restaurant, retail, entertainment and other industries that employ a typically low-wage, high-turnover workforce, I need to know as quickly as possible how this could affect our company. This is even more important given the fact that the same industries targeted by these labor movements for higher wages are also the most likely impacted by the changes required by the Affordable Care Act. It seems like a perfect storm of external macro-economic factors descending upon certain industries all at once:
- Wages: Labor is almost always the largest cost to a business. Small changes in any wage structure, when spread across a nation-wide workforce, end up having magnified impacts.
- Hours: The ACA requires benefits be offered to employees working more than 30 hours a week (in general, for more specifics, see our whitepapers or Health Reform Advisory practice.) Some employers will look to minimize the changes by managing their workforce less than 30 hours through schedule adjustment. This will only increase the need for a larger labor supply.
- Benefits: Some employees may have access to benefits for the first time through their employer or with the ACA will be required to have medical coverage by law now. How will an employer help employees understand the public exchanges since the suggested employer guidance is certainly not specific enough for any employer’s situation.
That’s three major changes all hitting certain employers all at once. Our leaders need accurate data and insightful analysis to inform their strategic decisions. If they haven’t asked you yet, now’s a time for HR to step into the strategic spotlight. Our HRIS systems should have the data necessary. Of course, the reporting engines that sit on top of that HR data is the true enabler of any strategic analysis – (ADP’s PCPW ReportSmith users, I am truly sorry. The rest of this article will just piss you off.)
Can we answer for the business the following items?
– How much would a $9 minimum wage increase change our cost of labor? What would this do to our overall profitability? Can we model the worst-case $15 / hour scenario?
- Would the business absorb the increased labor costs and lower profits or would they seek to reduce costs somewhere else? Having thought through this type of analysis is the core of Risk Management.
- If wages are held steady but competitors start to raise wages, are there other benefits that will attract the right workforce? Turnover is so high in these industries that we need to assure leaders we’ve thought about how and where the next cohort of employees will come from. Are there impacts to the ways we attract employees?
– Is this a time for Total Compensation Statements? Even those who work for minimum wage have hidden compensation. If an employee is looking at other employment options, are they taking into account meal discounts? What about training and advancement programs? FICA and some of the other hidden paycheck are a push as they’ll be provided elsewhere as well.
- Are there new incentives we could offer to increase the perceived value of working for our organization such as the discount programs offered by folks like Purchasing Power?
– And if you haven’t already tackled this, modeling the impacts of ACA needs to be a top priority. Beyond the “pay or play” analysis, there’s also workforce planning, cost of benefits and more to be done. Since we’ve covered this in other posts, I’m not going to dwell on this topic too much.
This is our opportunity to shine. When the executives turn to HR, we need to be prepared with the data they need – before we’re even asked. We need to model the scenarios they haven’t thought about yet and be ready when they react to what they see in the Journal or on TV. This is why point-in-time functionality is so important to HRIS. A strong analytics engine and consolidated reporting across all areas of HR, Payroll and Benefits is essential to being relevant in the c-suite discussions.
It’s not often we find our HR Technology world a part of the major headlines. Our work is often behind the scenes; focused on making our businesses and employees successful. But right now, there are massive changes going on in society as our country and co-workers try to adapt to a global economy, run away sovereign debt, increasing regulation and disruptive technology. This is our time.